JPMorgan Chase Bank, National Association, New Zealand Branch General Disclosure Statement · JPMorgan Chase Bank, National Association (generally abbreviated to JPMorgan Chase Bank,

JPMorgan Chase Bank, National Association,

New Zealand Branch

General Disclosure Statement

For the twelve months ended 31 December 2012

General Disclosure Statement

For the twelve months ended 31 December 2012

CONTENTS

Definitions ................................................................................................................................ 1

Corporate Information .................................................................................................................. 1

Pending Proceedings or Arbitration ................................................................................................. 7

Current Credit Rating of JPMCB ...................................................................................................... 8

Insurance Business and Non-Consolidated Activities ............................................................................ 8

Other Material Matters ................................................................................................................. 9

Financial Statements of the Overseas Bank and Overseas Banking Group .................................................. 9

Statement by the Directors and Chief Executive Officer of JPMCB NZ ...................................................... 9

Five Year Summary for the Banking Group ...................................................................................... 10

General Disclosure Statement ...................................................................................................... 11

Independent Auditors' Review Report ............................................................................................ 51

_____________________________________________________________________________________________________________________

JPMorgan Chase Bank, N.A. - New Zealand Branch 1

DEFINITIONS

In this General Disclosure Statement, unless the context otherwise requires:

JPMCB means the worldwide operations of JPMorgan Chase Bank, N.A., including JPMCB NZ Group;

JPMCB NZ or Branch means the New Zealand operations of JPMCB conducted through its New Zealand branch;

JPMCC means JPMorgan Chase & Co; and

the term “Banking Group” or “JPMCB NZ Group” means the consolidated New Zealand operations of JPMCB, and includes the

business conducted through JPMCB NZ and JPMCB’s subsidiaries and associated companies operating in New Zealand, being J.P.

Morgan Australia Limited, J.P. Morgan Markets Australia Pty Limited and J.P. Morgan Securities Australia Limited.

Unless otherwise defined in this General Disclosure Statement, terms defined in the Registered Bank Disclosure Statements

(Overseas Incorporated Registered Banks) Order (No. 2) 2012 (the Order) have the same meaning in this document.

CORPORATE INFORMATION

Registered Bank

JPMorgan Chase Bank, National Association (generally abbreviated to JPMorgan Chase Bank, N.A.), New Zealand Branch.

Address for Service

Level 13, ASB Tower

2 Hunter Street

Wellington 6011

New Zealand

Name and Address for Service of the Overseas Bank and Ultimate Holding Company

Overseas Bank Ultimate Holding Company

JPMorgan Chase Bank, N.A. JPMorgan Chase & Co.

Overseas Bank Address for Service Ultimate Holding Company Address for Service

1111 Polaris Parkway 270 Park Avenue

Columbus, Ohio, 43271 New York, New York 10017-2014

USA USA

Incorporation

JPMCB is a commercial bank offering a wide range of banking services to its customers both domestically and internationally. It

is chartered by the Office of the Comptroller of the Currency (OCC), a bureau of the United States Department of the Treasury.

JPMCB's main office is located in Columbus, Ohio, and it has branches in 23 States of America.

JPMCB was organised in the legal form of a banking corporation under the laws of the State of New York on 26 November 1968

for an unlimited duration. On 13 November 2004 it converted from a New York State banking corporation to a national banking

association. On the same date Bank One, National Association (Chicago, Illinois) and Bank One, National Association (Columbus,

Ohio) merged into JPMorgan Chase Bank, with JPMCB being the surviving legal entity.

JPMCB is one of the principal, wholly-owned subsidiaries of JPMCC. The ordinary shares of JPMCC are listed on the New York,

London and Tokyo Stock Exchanges and form part of the Dow Jones Industrial Average index of the New York Stock Exchange.

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FINANCIAL SUPPORT

Ranking of Local Creditors in Winding-up

JPMCB NZ is a branch of JPMCB and is not a separate legal entity. Therefore, obligations of JPMCB NZ are obligations of JPMCB.

The rights of all creditors of JPMCB, including those located in New Zealand, in the event of JPMCB's insolvency, would be

governed by the U.S. Federal Deposit Insurance Act of 1950. Under U.S. federal law, the Comptroller of the Currency, as the

appropriate federal banking regulator, is empowered to declare a national bank insolvent, and appoint the Federal Deposit

Insurance Corporation (the "FDIC") as receiver. In such role, the FDIC is authorised to liquidate the assets of the insolvent

institution and distribute the proceeds to the institution's creditors. Payment to holders of insured deposits held in JPMCB's U.S.

Branches, administrative expenses of the receiver and secured creditors rank in priority of payment over all other unsecured

creditors, including depositors in JPMCB's non-U.S. branches (such as JPMCB NZ) who would then rank pari passu in order of

payment. The basic insurance amount is $US250,000 per U.S depositor per insured.

Guarantee Arrangements

No material obligations of JPMCB (or the JPMCB NZ Group) are guaranteed as at the date of signing the Disclosure Statement.

CORPORATE GOVERNANCE

Directors of JPMCB

The name, occupation, professional qualifications and country of residence of each Director of JPMCB are as follows:

James Dimon

Executive Director, Chairman of the Board, President and Chief Executive Officer

MBA – Harvard University

United States of America

Frank John Bisignano

Executive Director, Co-Chief Operating Officer (effective 27 July 2012) and Chief Executive Officer of Mortgage Banking


Douglas L Braunstein (Resigned 31 December 2012)

Executive Director and Chief Financial Officer

BA (Finance) - Newport University


James S Crown

President of Henry Crown and Company

BA - Hampshire College; Law Degree - Stanford University Law School


Laban P Jackson, Jr

Chairman and Chief Executive Officer of Clear Creek Properties, Inc.

US Military Academy


Barry L Zubrow (Resigned 15 October 2012)

Executive Director and Head of Corporate and Regulatory Affairs

MBA - University of Chicago; JD – University of Chicago Law School


Marianne Lake (Appointed 1 January 2013)

Director and Chief Financial Officer

BSc of Physics – Reading Unversity

United Kingdom

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Address to which communications addressed to the Directors may be sent

Office of the Secretary

JPMorgan Chase Bank, N.A.

270 Park Avenue

New York, New York 10017-2070


Non-banking group companies of which the Directors of JPMCB are directors

The following Directors of JPMCB hold the following directorships:

· Mr Crown is a director of Henry Crown and Company, General Dynamics Corporation and Sara Lee Corporation, companies

incorporated in the United States of America

· Mr Jackson is a director of Clear Creek Properties, Inc., a company incorporated in the United States of America

In addition, the Directors of JPMCB are directors of a number of companies which are either wholly-owned subsidiaries of

JPMCB, are of a charitable or philanthropic nature, or relate to their personal superannuation or business affairs, and which are

not listed in this document.

JPMCB NZ’s Chief Executive Officer and Chief Administration Officer

The name, occupation, professional qualifications and country of residence of the JPMCB NZ Chief Executive Officer who held

office at any time during the reporting period ended 31 December 2012 are as follows:

Mark Richard Lawrence

Chief Executive Officer – New Zealand

Bachelor of Commerce – Otago University

New Zealand

The name, occupation, professional qualifications and country of residence of the JPMCB NZ Chief Operating Officer are as

follows:

Peter Alexander Corea

Chief Administrative Officer – Australia and New Zealand

CPA, MAICD

Australia

Non-banking group companies of which the New Zealand Chief Executive Officer and Chief Administration Officer are

directors

Mr Corea is a director of Ord Minnett Holdings Pty Limited, company registered in Australia. In addition, Mr Corea is a director of

a number of companies which are either wholly-owned subsidiaries of JPMCB, are of a charitable or philanthropic nature, or

relate to his personal superannuation or business affairs, and which are not listed in this document.

Mr Lawrence is a director of JP Morgan Trust Company (New Zealand) Limited.

Responsible Persons authorised in writing to sign this General Disclosure Statement in accordance with section 82 of the

Reserve Bank of New Zealand Act 1989 on behalf of each Director

· Robert Clive Priestley Senior Country Officer, JPMorgan Australia and New Zealand Group

· Peter Alexander Corea Chief Administrative Officer, JPMorgan Australia and New Zealand Group

Mr Robert Priestley is the Senior Country Officer for the sub-region of Australia and New Zealand. Mr Mark Lawrence reports to

Mr Peter Corea in his capacity as Chief Executive Officer of New Zealand.

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Address to which communications addressed to the Responsible Persons, including the New Zealand Chief Executive

Officer, may be sent

JPMorgan Chase Bank, N.A. - New Zealand Branch

PO Box 5652

Lambton Quay, Wellington 6145

New Zealand

Name and address of any auditor whose report is referred to in this General Disclosure Statement

PricewaterhouseCoopers PricewaterhouseCoopers LLP

201 Sussex Street 300 Madison Avenue

Sydney NSW 1171 New York, New York 10017

Australia United States of America

Corporate Governance and Risk Management

JPMCB’s Board and management execute their duties with regards to meeting prudential and statutory requirements by setting

in place prudent risk management policies and controls.

The risk management framework and governance structure of JPMCB is intended to provide comprehensive controls and ongoing

management of the major risks inherent in its business activities.

Audit Committee

JPMCB has an independent audit function established to evaluate, test, and report on the adequacy and effectiveness of the

system of internal control. The General Auditor reports functionally to the Audit Committee of the Board of Directors and

administratively to the CEO of the firm. Audit's mission is to provide the Audit Committee, executive and senior business

management and regulators with an independent assessment of the firm's ability to manage and control risk and to influence

and advise business managers on ways of enhancing their business' capacity to manage risk.

The Audit Department follows the global audit process for annual planning and risk assessment. The global risk-based audit

approach is designed to ensure an appropriate mix of audit coverage focused on key risks and controls of each business.

Depending on the nature and risk profile of the business and the related audit objectives, one or more of the following audit

activity types may be leveraged.

· Audit - is an examination of significant business and operational key risks and the controls established to mitigate those

risks, including compliance with laws, regulations and established policies and procedures.

· Follow-up Audit - consists of detailed inquiries, observation and testing to verify remediation of audit issues noted in prior

adversely rated audits.

· Targeted Control Review - focus on a select group of key risks and controls. These reviews allow Audit to quickly assess and

communicate whether key controls are operating effectively or require remediation.

· Continuous Auditing - work is performed to monitor business risk profiles, analyze changes and adjust risk assessments and

planned coverage as necessary.

· Change Activity - include assessment of key risks and controls for significant system developments, conversions, business

consolidations or business migrations, new products or new businesses development, new or revised regulations or

accounting rules, and large scale remediation programs.

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The Audit Committee is composed of three non-management Directors who are required by regulation to meet the

independence and expertise requirements. The purpose of the Audit Committee is to assist the Board oversight of:

· The independent registered public accounting firm's qualifications and independence;

· The performance of the corporation’s internal audit function and the independent registered public accounting firm; and

· Management's responsibilities to assure there is in place an effective system of controls reasonably designed to -

· Safeguard the assets and income of the corporation

· Assure the integrity of the corporation’s financial statements; and

· Maintain compliance with the corporation’s ethical standards, policies, plans and procedures, and with laws and

regulations.

Director Related Transactions

There are no transactions between the Directors and JPMCB and any member of JPMCB NZ Group as at the date of this General

Disclosure Statement which have either been entered into on terms other than those which would, in the ordinary course of

business of JPMCB or any member of JPMCB NZ Group, be given to any other person of like circumstances or means, or which

could otherwise be reasonably likely to materially influence the exercise of the Directors’ duties.

JPMCC has adopted a policy entitled “Transactions with Related Persons Policy” (Policy) which sets forth JPMCC’s policies and

procedures for reviewing and approving transactions with related persons (i.e. JPMCC’s Directors, executive officers and their

immediate family members). The transactions covered by the Policy include any financial transaction, arrangement or

relationship in which JPMCC (including JPMCB) is a participant, where:

· the related person has or will have a direct or indirect material interest; and

· the aggregate amount involved will or may be expected to exceed $US120,000 in any fiscal year.

After becoming aware of any transaction which may be subject to the Policy, the related person is required to report all

relevant facts with respect to the transaction to the General Counsel of JPMCC.

Upon determination by the General Counsel that a transaction requires review under the Policy, the material facts of the

transaction and the related person’s interest in the transaction are provided, in the case of Directors, to the Governance

Committee of JPMCC and, in the case of executive officers, to the Audit Committee.

The transaction is then reviewed by the applicable committee, which determines whether approval or ratification of the

transaction shall be granted. In reviewing a transaction, the applicable committee considers facts and circumstances which it

considers relevant to its determination. Material facts may include:

· management’s assessment of the commercial reasonableness of the transaction;

· the materiality of the related person’s direct or indirect interest in the transaction;

· whether the transaction may involve an actual or the appearance of a conflict of interest; and

· if the transaction involves a Director, the impact of the transaction on the Director’s independence.

Certain types of transactions are pre-approved in accordance with the terms of the Policy. These include transactions in the

ordinary course of business involving financial products and services provided by, or to, JPMCC (including JPMCB), including

loans, provided such transactions are in compliance with the Sarbanes-Oxley Act, Federal Reserve Board Regulation O and other

applicable laws and regulations.

Regulation O

Regulation O of the Federal Reserve Board of the United States of America establishes requirements for loans and other

extensions of credit that JPMCB may make to persons affiliated with JPMCB. The purpose of Regulation O is to protect the

soundness of financial institutions in the United States of America by preventing unwarranted extensions of credit by a financial

institution to persons affiliated with the financial institution that could put the financial institution's capital at risk. Regulation

O prohibits JPMCB from lending to its Directors and their related interests unless such extensions of credit:

· are made on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the

time for comparable transactions with unrelated third parties;

· are made following credit underwriting procedures that are not less stringent than for comparable transactions with

unrelated third parties; and

· do not involve more than the normal risk of repayment or present other unfavourable features.

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JPMCB NZ’s Chief Executive Officer

The New Zealand Chief Executive Officer is subject to Regulation O. However, there are no transactions between the New

Zealand Chief Executive Officer and JPMCB or any member of JPMCB NZ Group as at the date of this General Disclosure

Statement which have either been entered into on terms other than those which would, in the ordinary course of business of

JPMCB or any member of JPMCB NZ Group, be given to any other person of like circumstances or means, or which could

otherwise be reasonably likely to materially influence the exercise of the New Zealand Chief Executive Officer's duties.

Conflicts of Interest

The Conflicts Office of JPMCC monitors JPMCB's business activities to avoid or manage any conflicts of interests and related

reputation risks. The Conflicts Office reviews transactions, products and activities that may pose significant risks to JPMCB's

reputation as a result of actual or perceived conflicts of interest. Any transaction, product or activity that raises significant

reputation risk for JPMCB as a result of actual or perceived conflicts of interest must be referred to the Conflicts Office for

review and approval. JPMCC’s policy entitled “Global Conflicts Policy” (and related, business-specific modifications) describes

the activities subject to JPMCB’s conflicts risk management and the requirements for reporting them.

Conditions of Registration

JPMCB NZ was entered into the Reserve Bank of New Zealand register of registered banks effective 1 October 2007.

The registration of JPMCB NZ is subject to the following conditions (the “Conditions of Registration”) which came into effect

from 30 September 2011:

1. That the banking group does not conduct any non-financial activities that in aggregate are material relative to its total

activities.

In these conditions of registration, the meaning of “material” is based on generally accepted accounting practice.

2. That the banking group’s insurance business is not greater than 1% of its total consolidated assets.

For the purposes of this condition of registration, the banking group’s insurance business is the sum of the following

amounts for entities in the banking group:

(a) if the business of an entity predominantly consists of insurance business and the entity is not a subsidiary of

another entity in the banking group whose business predominantly consists of insurance business, the amount

of the insurance business to sum is the total consolidated assets of the group headed by the entity; and

(b) if the entity conducts insurance business and its business does not predominantly consist of insurance business

and the entity is not a subsidiary of another entity in the banking group whose business predominantly consists

of insurance business, the amount of the insurance business to sum is the total liabilities relating to the

entity’s insurance business plus the equity retained by the entity to meet the solvency or financial soundness

needs of its insurance business.

In determining the total amount of the banking group’s insurance business:

(a) all amounts must relate to on balance sheet items only, and must comply with generally accepted accounting

practice; and

(b) if products or assets of which an insurance business is comprised also contain a non-insurance component, the

whole of such products or assets must be considered part of insurance business.

For the purposes of these conditions of registration,

“insurance business” means the undertaking or assumption of liability as an insurer under a contract of insurance;

“insurer” and “contract of insurance” have the same meaning as provided in sections 6 and 7 of the Insurance

(Prudential Supervision) Act 2010.

3. That the business of the registered bank in New Zealand does not constitute a predominant proportion of the business

of the registered bank.

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Conditions of Registration (continued)

4. That no appointment to the position of the New Zealand Chief Executive Officer of the registered bank shall be made

unless:

(i) the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; and

(ii) the Reserve Bank has advised that it has no objection to the appointment.

5. That JPMorgan Chase Bank, N.A. complies with the requirements imposed on it by the Office of the Comptroller of the

Currency and the Federal Reserve Bank of New York.

6. That JPMorgan Chase Bank, N.A. complies with the following minimum capital adequacy requirements, as administered

by the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York:

(i) tier one capital of JPMorgan Chase Bank, N.A. is not less than 4% of risk weighted exposures; and

(ii) capital of JPMorgan Chase Bank, N.A. is not less than 8% of risk weighted exposures.

7. That liabilities of the registered bank in New Zealand, net of amounts due to related parties (including amounts due to

a subsidiary or affiliate of the registered bank) do not exceed $NZ15 billion.

8. That retail deposits of the registered bank in New Zealand do not exceed $200 million. For the purposes of this

condition, retail deposits are defined as deposits by natural persons, excluding deposits with an outstanding balance

which exceeds $250,000.

In these conditions of registration,

“banking group” means the New Zealand business of the registered bank and its subsidiaries as required to be reported in group

financial statements for the group’s New Zealand business under section 9(2) of the Financial Reporting Act 1993;

“business of the registered bank in New Zealand” means the New Zealand business of the registered bank as required to be

reported in financial statements under section 8(2) of the Financial Reporting Act 1993;

“generally accepted accounting practice” has the same meaning as in section 2 of the Financial Reporting Act 1993;

“liabilities of the registered bank in New Zealand” means the liabilities of the registered bank as required to be reported in

financial statements under section 8(2) of the Financial Reporting Act 1993.

PENDING PROCEEDINGS OR ARBITRATION

There are no pending proceedings or arbitration of which we are aware that may have a material adverse effect on JPMCB NZ

Group, nor, to the extent publicly available, that may have a material adverse effect on JPMCB.

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CURRENT CREDIT RATING OF JPMCB

JPMCB has the following general credit ratings applicable to long term senior unsecured obligations payable in any country or

currency and applicable in New Zealand, in New Zealand dollars:

Current Rating

Previous Credit Rating

(if changed in the previous two

years)

Outlook

Moody's Investor Services, Inc Aa3 Aa1 Stable

Standard & Poor’s Corporation A+ AA- Negative

Fitch IBCA, Inc A+ AA- Stable

Legend to Rating Scales

Long Term Debt Ratings Moody’s

(a)

S&P

(b)

FITCH

(b)

Highest quality/Extremely strong capacity to pay interest and principal

High quality/Very strong

Upper medium grade/Strong

Aaa

Aa

A

AAA

AA

A

AAA

AA

A

Medium grade (lowest investment grade)/Adequate

Predominately speculative/Less near term vulnerability to default

Speculative, low grade/Greater vulnerability

Baa

Ba

B

BBB

BB

B

BBB

BB

B

Poor to default/Identifiable vulnerability

Highest speculations

Lowest quality, no interest

Caa

Ca

C

CCC

CC

C

CCC

CC

C

Payment in default, in arrears – questionable value D D

(a) Moody’s applies numeric modifiers to each generic ratings category from Aa to B, indicating that the counterparty is:

(1) in the higher end of its letter rating category

(2) in mid-range

(3) in lower end

(b) S&P and Fitch apply plus (+) or minus (-) signs to ratings from AA to CCC, to indicate relative standing within the major

rating categories.

Members of JPMCB NZ Group

JPMCB NZ Group companies (other than JPMCB NZ), being:

· the New Zealand Operation of J.P. Morgan Australia Limited (incorporated in Australia);

· the New Zealand Operation of J.P. Morgan Markets Australia Pty Limited (incorporated in Australia); and

· the New Zealand Operation of J.P. Morgan Securities Australia Limited (incorporated in Australia)

are involved in investment banking activities. These companies are wholly-owned by JPMCB.

INSURANCE BUSINESS AND NON-CONSOLIDATED ACTIVITIES

JPMCB NZ Group does not conduct any insurance business.

JPMCB does not conduct in New Zealand, outside of the JPMCB NZ Group, any insurance business or non-financial activities.

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FIVE YEAR SUMMARY FOR THE BANKING GROUP

Audited Audited Audited Audited Audited

12 months 12 months 12 months 12 months 12 months

31/12/2012 31/12/2011 31/12/2010 31/12/2009 31/12/2008

$’000 $’000 $’000 $’000 $’000

STATEMENT OF COMPREHENSIVE

INCOME

Interest income 27,491 30,573 13,243 4,135 4,162

Interest expense (16,094) (13,681) (2,258) (3,400) (2,480)

Net interest income 11,397 16,892 10,985 735 1,682

Other operating income 2,394 34,567 10,668 5,038 1,591

Total operating income 13,791 51,459 21,653 5,773 3,273

Credit impairment losses - - - - -

Operating expenses (9,263) (8,279) (8,224) (4,048) (1,897)

Net profit/(loss) before taxation 4,528 43,180 13,429 1,725 1,376

Income tax (expense)/benefit (2,155) (16,652) (4,029) (192) (213)

Net profit/(loss) after taxation 2,373 26,528 9,400 1,533 1,163

Other comprehensive income, net of tax (1,441) 131 52 - -

Total comprehensive income for the

period932 26,659 9,452 1,533 1,163

(Repatriation)/reimbursement (to)/from

Head Office

STATEMENT OF FINANCIAL POSITION

Total assets 745,754 1,007,102 473,864 165,822 113,409

Total individually impaired assets - - - - -

Total liabilities 745,754 970,450 466,059 165,107 108,449

Head office accounts - 36,652 7,805 715 4,960

422 2,188 (2,362) (5,841) 241

Amounts included in the above statement are fully disclosed in the audited financial statements.

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General Disclosure Statement For the twelve months ended 31 December 2012

Contents

Statement of Significant Accounting Policies ............................................................................................... 12

Statement of Comprehensive Income ......................................................................................................... 20

Statement of Changes in Equity ............................................................................................................... 21

Statement of Financial Position ............................................................................................................... 22

Statement of Cash Flows ....................................................................................................................... 23

Notes to the Financial Statements

Note 1 Interest Income ................................................................................................................. 24

Note 2 Other Operating Income/(Loss) ............................................................................................... 24

Note 3 Operating Expenses ............................................................................................................. 24

Note 4 Income Tax Expense/(Benefit) ................................................................................................ 24

Note 5 Equity ............................................................................................................................. 25

Note 6 Currency Translation Reserve ................................................................................................. 25

Note 7 Cash and Cash Equivalents ..................................................................................................... 25

Note 8 Trading and Other Receivables ............................................................................................... 26

Note 9 Fixed Assets ...................................................................................................................... 26

Note 10 Deferred Tax Assets ............................................................................................................ 26

Note 11 Payables .......................................................................................................................... 27

Note 12 Auditors’ Remuneration ........................................................................................................ 27

Note 13 Key Management Compensation .............................................................................................. 27

Note 14 Related Party Transactions .................................................................................................... 28

Note 15 Total Liabilities of the Registered Bank, Net of Amounts Due to Related Parties ..................................... 30

Note 16 Reconciliation of Net Surplus to Net Cash Inflow from Operating Activities ........................................... 30

Note 17 Commitments and Contingent Liabilities .................................................................................... 30

Note 18 Lease Commitments ............................................................................................................ 31

Note 19 Intangible Assets ................................................................................................................ 31

Note 20 Events after the Reporting Period ............................................................................................ 31

Note 21 Financial Statements of JPMorgan Chase Bank, N.A. ...................................................................... 32

Note 22 Interest Earning and Discount Bearing Assets and Liabilities ............................................................. 32

Note 23 Capital Adequacy ............................................................................................................... 32

Note 24 Concentration of Credit Exposure to Individual Counterparties ........................................................... 32

Note 25 Activities of the Banking Group in New Zealand ............................................................................ 33

Note 26 Risk Management ............................................................................................................... 33

Note 27 Fair Value Measurement ....................................................................................................... 46

Note 28 Financial Instruments by Category ........................................................................................... 47

Note 29 Exposures to Market Risk ...................................................................................................... 49

Note 30 Registered Bank Asset Quality ................................................................................................ 49

Note 31 Registered Bank Profitability and Size ....................................................................................... 50

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STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

A. Statutory Base

These financial statements have been prepared and presented in accordance with the requirements of the Financial Reporting

Act 1993, the Registered Bank Disclosure Statements (Overseas Incorporated Registered Banks) Order (No. 2) 2012, the Reserve

Bank of New Zealand Act 1989, applicable New Zealand Equivalents to International Financial Reporting Standards (NZ-IFRS) and

other applicable Financial Reporting Standards, as appropriate for profit-oriented entities. The financial report, comprising the

financial statements and accompanying notes of the Branch (as defined below) and the Banking Group (as defined below)

comply with International Financial Reporting Standards.

These financial statements are for JPMorgan Chase Bank, N.A., New Zealand Branch (JPMCB NZ or the Branch) and the “Banking

Group”, comprising the New Zealand operations of JPMCB NZ and all those subsidiaries of JPMorgan Chase Bank, N.A. whose

business is required to be reported in the financial statements for the Group’s New Zealand business.

These financial statements are authorised by the Directors for issue on 25 March 2013. The company has the power to amend

and re-issue the financial report.

B. Measurement Base

The financial statements are based on the general principles of historical cost, as modified by the valuation of certain assets

which are recorded at their fair values. The going concern concept and the accruals concept of accounting have been adopted.

All amounts are expressed in New Zealand dollars and all references to “$” are to New Zealand dollars unless otherwise stated.

The amounts in the financial report have been rounded to the nearest thousand dollars, unless otherwise stated.

C. Basis of Aggregation

The financial statements of JPMCB NZ, the New Zealand operations of J.P. Morgan Australia Limited, J.P. Morgan Securities

Australia Limited and J.P. Morgan Markets Australia Pty Limited, have been aggregated to form the Banking Group.

All transactions and balances between entities within the Banking Group have been eliminated.

D. Comparatives

Where necessary, comparatives have been reclassified to conform with changes in presentation in the current reporting period.

E. Critical Accounting Estimates and Judgements

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to

exercise its judgement in the process of applying the Group’s accounting policies. Estimates and judgements are determined

using historical knowledge and other factors, including a reasonable expectation of future events. Estimates, where applied, are

subject to continuing evaluation for appropriateness. The areas involving a higher degree of judgement or complexity, or areas

where assumptions and estimates are significant to the financial statements, are detailed below.

· Fair Value

Where an active market exists for a financial instrument, fair values are determined by reference to the quoted

prices/yields at balance date. Such instruments are classified as level 1 within the fair value hierarchy table in note 27 (Fair

Value Measurement). However, for certain financial instruments where no active market exists, judgement is used to select

the valuation technique which best estimates its fair value.

The fair value of financial instruments held by the company at balance date, where valuation techniques or models have

been applied, are classified within level 2 of the fair value hierarchy table, as inputs to the techniques and models are

market observable.

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STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

E. Critical Accounting Estimates and Judgements (continued)

· Impairment of Goodwill and Intangible Assets

The recoverable amount of goodwill is determined based on the future cash flow projection discounted by reporting units

estimated cash of equity capital of 12.0%. The Group’s cost of equity is determined using the Capital Asset Pricing Model.

The discount rate used for each reporting unit represents an estimate of the cost of equity capital for that reporting unit

and is determined based on the Firm’s overall cost of equity, as adjusted for the risk characteristics specific to each

reporting unit and jurisdiction. To assess the reasonableness of the discount rates used for each reporting unit,

management compares the discount rate to the estimated cost of equity for publicly traded institutions with similar

businesses and risk characteristics.

All future cash flows are based on approved five year strategic plans, plus a further four year projection incorporating a 3%

growth rate to reflect inflation. While the plan assumes certain economic conditions, including net interest margin

contractions to 30bps, client attrition of 10% in custody and 5% in fund administration and a 10% repricing for all products,

plus market share increases, technology deployments and expense synergies, the forecast is not reliant on any one

particular assumption. The business forecasts applied by management are considered appropriate as they are based on past

experience and are consistent with observable current market information. The results of the impairment testing performed

did not result in any impairment being identified.

There are no other judgements that management has made in the process of applying the company’s accounting policies that

have a significant effect on the amounts recognised in the financial statements, nor any key assumptions concerning the future,

and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material

adjustment to the carrying amounts of assets and liabilities within the next financial year.

F. Accounting Policies

Accounting policies, which materially affect the measurement of profit and the financial position, have been applied.

1. Revenue

Revenue is measured at the fair value of the consideration received or receivable. The company recognises revenue when it

is probable that the economic benefits will flow to the company and the revenue amount can be reliably measured.

Interest revenue is recognised on an accrual basis using the effective interest rate method.

Fees and commissions revenue is recognised on the execution of a client order or upon the delivery of a service to a client.

Fees and commissions received that are integral to the effective interest rate of a financial asset are recognised using the

effective interest method. Loan commitment fees, together with related direct cost, are deferred and recognised as an

adjustment to the effective interest rate rate on a loan once drawn.

Trading revenue includes realised and unrealised gains and losses arising from changes in the fair value of financial

instruments and gains and losses from direct hedging. JPMCB manages the hedging holistically for both Australia and New

Zealand and follows two methods in doing so:

(i) Direct hedging for single security transactions;

(ii) Macro hedging for large portfolio of transactions

Any gains or losses from direct hedging are included in the General Disclosure Statements of the JPMCB NZ Group regardless

whether they have been transacted with New Zealand clients or counter parties to ensure financial statements reflect

economic reality of the underlying transactions. However any gains or losses from macro hedging are excluded in the

financial statements as deriving of the specific allocation applicable to JPMCB NZ Group is operationally challenging.

_____________________________________________________________________________________________________________________



2. Foreign Currencies

Items included in the financial statements are measured using the currency of the primary economic environment in which

it operates (the functional currency). These financial statements are presented in New Zealand dollars, which is the Banking

Group's functional and presentation currency. Monetary assets and liabilities denominated in foreign currencies at balance

date are converted at rates of exchange ruling at that date. Gains and losses due to currency fluctuations are included in

the Statement of Comprehensive Income.

The results and financial position of all foreign operations that have a functional currency different from New Zealand

dollars are translated into the presentation currency as follows:

· Assets and liabilities for each financial position presented are translated at the closing rate at the date of that financial

position;

· Income and expenses for each Statement of Comprehensive Income are translated at average exchange rates, unless

this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in

which case income and expenses are translated at the dates of the transactions;

· Opening retained earning is brought forward at the closing rate of previous financial year; and

· All resulting exchange differences are recognised in the foreign currency translation reserve as a separate component

of equity.

3. Taxation

Current tax is calculated by reference to the amount of income taxes payable or recoverable in tax loss for the period. It is

calculated using tax rates and tax laws that have been enacted or substantively enacted by the company in respect of the

taxable profits to date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is

unpaid (or refundable).

Deferred tax is accounted for using the financial position liability method in respect of temporary differences arising

from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding

tax base of those items. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are

recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible

temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are

not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities

(other than as a result of a business combination) which affects neither taxable income nor accounting profit.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in

which the company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

4. Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, and other short term highly liquid

investments with original maturities of three months or less, that are readily convertible to known amounts of cash, and

bank overdrafts.

Bank overdrafts are classified within current liabilities in the Statement of Financial Position.

5. Goods and Services Tax (GST)

The Statement of Comprehensive Income has been prepared so that all components are stated exclusive of GST, except

where GST is not recoverable. All items in the Statement of Financial Position are stated net of GST, with the exception of

receivables and payables, which include GST invoiced.

_____________________________________________________________________________________________________________________



6. Provision for Doubtful Debts

All receivables held by the Banking Group are regularly reviewed and a specific provision is raised for any amounts where

recovery is considered doubtful.

7. Receivables

Receivables comprise client and other receivables, which are due for settlement no more than 30 days from the date of

recognition, and receivables from wholly-owned group entities, which are unsecured and are settled periodically.

Receivables are recognised initially at fair value and subsequently measured at amortised cost, being the principal amounts

that are due at balance date plus accrued interest and less, where applicable, any unearned income and provisions for

doubtful debts.

Collectability of receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off in

the period in which they are identified, and a provision for doubtful debts is established when there is objective evidence

that the company will not be able to collect all amounts due. Significant financial difficulties of the debtor, probability that

the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered

indicators that the trade receivable is impaired.

8. Impairment

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for

impairment, or more frequently if events or changes in circumstances indicate that they may be impaired.

Other assets are tested for impairment at least annually, or whenever events or changes in circumstances indicate that the

carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying

value exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and

value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are

separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets.

Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at

the end of each reporting period.

9. Financial Instruments

The Banking Group classifies its financial instruments in the following categories: financial instruments at fair value through

profit or loss and loans and receivables. The classification depends on the purpose for which the assets were acquired.

Management determines the classification of its instruments at initial recognition and re-evaluates this designation at every

reporting date.

Classification

(i) Financial instruments at fair value through profit and loss

Financial instruments at fair value through profit or loss are financial instruments held for trading. A financial

instrument is classified in this category if acquired principally for the purpose of selling in the short term or if so

designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges.

Instruments in this category are classified as current assets or current liabilities if they are expected to be settled

within 12 months; otherwise classified under as non-current.

As at balance sheet date, the Banking Group holds the following financial instruments in this category:

o Financial assets at fair value through profit or loss

o Financial liabilities at fair value through profit or loss

_____________________________________________________________________________________________________________________



9. Financial Instruments (continued)

(ii) Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an

active market. They are included in current assets, except for those with maturities greater than 12 months after the

end of the reporting period which are classified as non-current assets. The Banking Group’s loans and receivables

comprise ‘trade and other receivables’, ‘commercial loans’, ‘client overdraft’, ‘cash collateral pledged on reverse

repurchase agreements’ and ‘cash collateral received on repurchase agreements’ in the statement of financial position.

As part of its operating activities, the company lends and borrows securities on a collateralised basis. The securities

lent under such agreements are ordinarily not derecognised from the statement of financial position, as the risks and

rewards of ownership remain with the initial holder. Cash collateral pledged under such agreements is recognised as a

financial asset, while cash received is recognised as a financial liability.

Fees and interest relating to stock borrowing or lending and repurchase or reverse repurchase agreements are

recognised in the Statement of Comprehensive Income, using the effective interest rate method, over the expected life

of the agreement.

Recognition and measurement

Financial instruments carried at fair value through profit or loss are initially recognised at fair value excluding transaction

costs which are expensed in the profit and loss component of the Statement of Comprehensive Income in the period in

which they arise.

Gains and losses arising from changes in the fair value of the ‘financial instruments at fair value through profit or loss’

category are included in the profit and loss component of the Statement of Comprehensive Income in the period in which

they arise. Dividend income from financial instruments at fair value through profit or loss is recognised in the profit and loss

component of the Statement of Comprehensive Income as part of trading income when the company’s right to receive

payments is established.

Loans and receivables at initial recognition, are measured at fair value plus transaction costs that are directly attributable

to the acquisition of the asset. Loans and receivables are subsequently carried at amortised cost using the effective interest

method.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the asset have expired or have been

transferred and the Group has transferred substantially all risks and rewards or ownership.

Financial liabilities are derecognised and removed from the balance sheet when they are extinguished, that is, when the

obligation is discharged, cancelled or expires. An exchange between an existing borrower and lender of debt instruments

with substantially different terms, or the modification of the terms of an existing financial liability, shall be recognised as

an extinguishment of the original financial liability and the recognition of a new financial liability.

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally

enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and

settle the liability simultaneously.

Impairment

The Banking Group assesses at the end of each reporting period whether there is objective evidence that a financial

instrument or group of financial instruments is impaired. A financial instrument or a group of financial instruments is

impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more

events that occurred after the initial recognition for the asset (a “loss event”) and that loss event (or events) has an impact

on the estimated future cash flows of the financial instrument or group of financial instruments that can be reliably

estimated.

_____________________________________________________________________________________________________________________



9. Financial Instruments (continued)

Impairment (continued)

For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and

the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at

the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss

is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for

measuring any impairment loss is the current effective interest rate determined under the contract. As a practical

expedient, the Banking Group may measure impairment on the basis of an instrument’s fair value using an observable

market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an

event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of

the previously recognised impairment loss is recognised in profit or loss.

10. Intangible Assets

(i) Goodwill

Represents the excess of the purchase consideration over the identifiable net assets of an acquisition at the date of

gaining control. Goodwill on acquisition of subsidiaries is included in intangible asset. Goodwill is recognised as an asset

and not amortised but tested for impairment annually or more frequently if events or changes in circumstances indicate

they may be impaired and is carried at cost less accumulated impairment losses.

(ii) IT Software

Custody clearing services software (“CCS”) is acquired at fair value and amortised over a useful life of 3 years, on a

straight line basis. JPMCB NZ acquired the licensing rights to CCS which enables the company to continue to serve the

clients and also provide third party sub-custody services to new clients. The fair value is based on an assessment on

equivalent cost to purchase a similar system from a third party, less cost to upgrade the system to the same features as

CCS. The useful life of 3 years is based on assessment by JPMCB NZ’s technology team.

(iii) Customer Contracts

Intangible assets – customer contracts/relationships are deemed to be acquired at fair value, and are amortised over a

useful life of 10 years, on a straight line basis. JPMCB NZ acquires the rights to decide which client (contracts) it will

novate subject to clients’ agreement. The contracts and relationships are deemed to be one intangible asset as the

acquired relationship is critical in entering into contracts with the clients, since such contracts are typically open

ended with no maturity and on par with the relationships. Reasonable lifetime for these contracts/relationships is 10

years.

11. Property, Plant and Equipment

Plant and equipment, including leasehold improvements, is measured on the cost basis less depreciation and impairment

losses. Cost includes expenditure that is directly attributable to the acquisition of the items.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the

recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that

will be received from the assets’ employment and subsequent disposal. The expected net cash flows have been discounted

to their present values in determining the recoverable amount.

Depreciation

The depreciable amount of all fixed assets is depreciated on a straight line basis over their useful lives to the Banking

Group, commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the

shorter of either the unexpired period of the lease or the estimated useful life of the improvements. The depreciation rates

used for each class of depreciable assets are:

Class of Fixed Asset Depreciation Rate

Plant and Equipment 19% - 39%

Leasehold Improvements 9% - 25%

_____________________________________________________________________________________________________________________



11. Property, Plant and Equipment (continued)

The assets’ residual value and useful lives are reviewed, and adjusted if appropriate, at each end of the reporting period.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are

included in the Statement of Comprehensive Income.

12. Payables

Payables represent liabilities for goods and services provided to the company prior to the end of the reporting period, which

are unpaid. These amounts are unsecured and are usually settled within 30 days of recognition.

Payables to entities within the wholly-owned group are unsecured and are settled periodically, usually within 30 days of

recognition.

Payables also include interest expenses and funds payable to clients.

13. Deposits and Amounts Due to Other Financial Institutions

Deposits and amounts due to other financial institutions are recognised initially at fair value plus transaction costs and

subsequently at amortised cost using the effective interest rate method.

14. Repatriation of Profits to Head Office

The profit of the Banking Group is repatriated to the head office on a monthly basis. Similarly, any losses are reimbursed by

head office on a monthly basis.

15. Interest Expense

Interest expenses include interest on bank overdrafts, borrowings and interest paid to clients for deposits held.

16. Employee Benefit Expenses

Employee benefits, including salaries, annual bonuses, paid annual leave and the costs of non-monetary benefits, including

any related on-costs, are accrued in the year in which the associated services are rendered by employees. Where payment

or settlement is deferred and the effect would be material, these amounts are stated at their present values.

17. Equity Compensation Benefits

A restricted stock/unit award is the right to be vested in a specific number of shares of JPMorgan Chase & Co. common

stock on a specific date(s), provided that the employee meets the grant's restriction requirements. The awards will vest

based on the schedule in the Award Agreement and are subject to the related Terms and Conditions of the award, including

continued employment. Employees granted restricted stock are shareholders and have voting rights.

The company reimburses JPMorgan Chase & Co for the costs of the equity compensation benefits as such costs are incurred

for the benefit of the company’s employees and are part of the total staff costs of the company. These employee benefit

expenses which are measured at their fair value at grant date are amortised and recognised in the Statement of

Comprehensive Income over the relevant vesting periods. These employee benefit expenses are credited to "Amounts

payable to wholly owned group entities" in "Trade and other payables" where an obligation to settle with Head Office arises

within 12 months. For employee benefit expenses which are not recharged by Head Office within this timeframe, the

corresponding amounts are credited to "Employee Benefit Reserve" in the Statement of Changes in Equity.

_____________________________________________________________________________________________________________________



18. Operating Lease Payments and Receipts

The Banking Group has entered into operating leases for its premises. The total payments made under operating leases net

of incentives received, if any, are charged to the Statement of Comprehensive Income on a straight-line basis over the

period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be

made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

19. Principal Activities

The Banking Group companies are involved in investment banking, treasury and securities services activities.

20. Change in Accounting Policies

No change in accounting policies were made during the period.

21. Early Adoption of New or Revised Standards or Interpretations

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early

adopted by JPMCB NZ group are listed below. No material differences are expected to result from the introduction of these

standards.

New Zealand Equivalent to IFRS and IAS Effective Date

§ NZ IFRS 7: Financial Instruments; Disclosures

Amended by: NZ IFRS 9: Financial Instruments (effective 1 January 2015)

§ NZ IFRS 9: Financial Instruments (effective 1 January 2015)

§ NZ IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors


§ NZ IAS 12 : Income Taxes


§ NZ IAS 18: Revenue


§ NZ IAS 21: The Effects of Changes in Foreign Exchange Rates


§ NZ IAS 24: Related party transactions (revised) (effective 1 January 2015)

§ NZ IAS 27 : Consolidated and Separate Financial Statements


§ NZ IAS 32 : Financial Instruments: Presentation


§ NZ IAS 36: Impairment of Assets


New Zealand Equivalent to IFRIC

§ NZ IFRIC 10: Interim Financial Reporting and Impairment


§ NZ IFRIC 12: Service Concession Arrangements


§ Diff Rep: Framework for Differential Reporting for Entities Applying the New Zealand

Equivalents to International Financial Reporting Standards Reporting Regime (2005)


_____________________________________________________________________________________________________________________


STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2012

Audited Audited Audited Audited

12 months 12 months 12 months 12 months

31/12/2012 31/12/2011 31/12/2012 31/12/2011

Interest income 1 27,491 30,573 9,651 7,376

Interest expense (16,094) (13,681) (5,466) (3,429)

Net interest income 11,397 16,892 4,185 3,947

Other operating income/(loss) 2 2,394 34,567 6,818 6,489

Total operating income 13,791 51,459 11,003 10,436

Operating expenses 3 (9,263) (8,279) (9,263) (8,279)

Net profit/(loss) before taxation 4,528 43,180 1,740 2,157

Income tax (expense)/benefit (2,155) (1,318)

Net profit/(loss) after taxation 2,373 26,528 422 (2,188)

Other comprehensive income, net of tax 6 (1,441) 131 - -

Total comprehensive income for the period

(16,652)

Note

Banking Group ($'000) Branch ($'000)

4

932 26,659 (2,188)422

(4,345)

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

_____________________________________________________________________________________________________________________


STATEMENT OF CHANGES IN EQUITY


Ordinary Retained

Foreign

currency

translation Total Ordinary Retained Total

Shares Earnings reserve Equity Shares Earnings Equity

31 December 2011

Equity as at 1 January 2011

(audited) - 7,753 52 7,805 - - -

Net profit/(loss) after taxation - 26,528 - 26,528 - (2,188) (2,188)

Foreign currency translation

reserve movement 6 - - 131 131 - - -

Total comprehensive income for

the year - 26,528 131 26,659 - (2,188) (2,188)

(Repatriation)/reimbursement

(to)/from head office - 2,188 - 2,188 - 2,188 2,188

Equity as at 31 December 2011

(audited) 5 - 36,469 183 36,652 - - -

31 December 2012

Equity as at 1 January 2012

(audited) - 36,469 183 36,652 - - -

Net profit/(loss) after taxation - 2,373 - 2,373 - 422 422

Foreign currency translation

reserve movement 6 - - (1,441) (1,441) - - -

Total comprehensive income for

the year - 2,373 (1,441) 932 - 422 422

(Repatriation)/reimbursement

(to)/from head office - (37,584) - (37,584) - (422) (422)

Equity as at 31 December 2012

(audited) 5 - 1,258 (1,258) - - - -

Branch ($'000)Banking Group ($'000)

Note

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

_____________________________________________________________________________________________________________________


STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2012



31/12/2012 31/12/2011 31/12/2012 31/12/2011

ASSETS

Current Assets

Cash and cash equivalents 7 201,883 234,290 201,883 234,290

Trading and other receivables 8 289,176 260,029 9,377 5,625

Financial assets at fair value through profit or loss 9 178,495 6,741 - -

Cash collateral pledged on reverse repurchase

agreements 11,772 458,327 - -

Loans 30 63,106 46,208 63,106 46,208

744,432 1,005,595 274,366 286,123

Non Current Assets

Fixed assets 9 290 400 290 400

Intangible assets 19 901 1,035 901 1,035

Deferred tax assets 10 131 72 131 72

1,322 1,507 1,322 1,507

Total Assets 745,754 1,007,102 275,688 287,630

LIABILITIES

Current Liabilities

Overdrafts 7(a) 19 178 19 178

Deposits – short term 271,315 285,122 271,315 285,122

Financial liabilities at fair value through profit or

loss 10 121,706 5,316 - -

Cash collateral received on repurchase

agreements 46,164 457,259 - -

Payables 11 305,708 208,968 4,354 1,099

Provision for taxation 842 13,607 - 1,231

Total Liabilities 745,754 970,450 275,688 287,630

Net Assets - 36,652 - -

EQUITY

Attributable to the shareholders of the Banking

Group - 36,652 - -

Total Equity 5 - 36,652 - -


Note

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

_____________________________________________________________________________________________________________________


STATEMENT OF CASH FLOWS




31/12/2012 31/12/2011 31/12/2012 31/12/2011

CASH FLOWS FROM OPERATING ACTIVITIES

Fees, commissions and other income received 8,125 8,932 6,586 6,140

Payments to suppliers and employees (2,234) (893) (791) (1,025)

Receipts from/(payments to) related parties 19,883 (69,572) (6,935) 131,748

Net movement in client balances (5,604) (4,874) - -

Net proceed from disposal/(purchase) of financial

instruments (21,572) 195,253 20 182

Net (increase)/decrease in loans (16,898) (45,388) (16,898) (45,388)

Increase/(decrease) in deposits (15,625) 22,530 (15,625) 22,530

Tax paid (3,028) (2,284) (3,028) (2,284)

Interest received 20,425 25,559 9,691 7,112

Interest paid (13,641) (13,733) (3,189) (3,485)

Net cash inflow/(outflow) from operating activities 16 (30,169) 115,530 (30,169) 115,530

CASH FLOWS FROM INVESTING ACTIVITIES

Plant and equipment 16 (155) 16 (155)

Net cash inflow/(outflow) from investing activities 16 (155) 16 (155)

CASH FLOWS FROM FINANCING ACTIVITIES

(Repatriation)/reimbursement of profit (1,228) (1,941) (1,228) (1,941)

Net cash inflow/(outflow) from financing activities (1,228) (1,941) (1,228) (1,941)

Net increase/(decrease) in cash (31,381) 113,434 (31,381) 113,434

Opening cash and cash equivalents 234,112 121,847 234,112 121,847

Effect of changes in foreign exchange rates on cash

balances (867) (1,169) (867) (1,169)

Closing cash and cash equivalents 7(a) 201,864 234,112 201,864 234,112


Note

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

_____________________________________________________________________________________________________________________


NOTES TO THE FINANCIAL STATEMENTS




31/12/2012 31/12/2011 31/12/2012 31/12/2011


NOTE 1 - INTEREST INCOME

Cash and cash equivalents 7,296 5,139 7,296 5,139

Trading securities 18,709 25,256 869 2,059

Foreign currency swaps 4 41 4 41

Loans 1,482 137 1,482 137

Total interest income 27,491 30,573 9,651 7,376

NOTE 2 – OTHER OPERATING INCOME/(LOSS)

Fee and commissions income 11,013 10,961 6,788 6,303

Trading income/(loss) (8,629) 23,602 20 182

Other income/(loss) 10 4 10 4

Total other operating income/(loss) 2,394 34,567 6,818 6,489

* As set out in significant accounting policies (page 13), any gains or losses from direct hedging for single swap transactions are

reflected in trading income/(losses).

NOTE 3 – OPERATING EXPENSES

Administration expenses 5,770 5,688 5,770 5,688

Employee expenses 1,430 1,321 1,430 1,321

Occupancy expenses 216 228 216 228

Technology & communications expenses 39 21 39 21

Professional services expenses 68 124 68 124

Depreciation & amortisation 228 199 228 199

Travel expenses 23 39 23 39

Other expenses 1,489 659 1,489 659

Total operating expenses 9,263 8,279 9,263 8,279

NOTE 4 – INCOME TAX EXPENSE / (BENEFIT)

Operating surplus/(deficit) before tax 4,528 43,180 1,740 2,157

Income tax expense/(benefit) - prima facie at the

Australian rate of 30% and New Zealand rate of 28% 1,324 12,911 487 604

Tax effect of other assessable income 904 3,133 904 3,133

Adjustment for (over)/under provision in prior periods (73) 608 (73) 608

Total income tax expense 2,155 16,652 1,318 4,345

_____________________________________________________________________________________________________________________


NOTES TO THE FINANCIAL STATEMENTS (continued)




31/12/2012 31/12/2011 31/12/2012 31/12/2011


NOTE 5 – EQUITY

Paid in share capital - - - -

Reserves (1,258) 183 - -

Retained earnings 1,258 36,469 - -

Total equity at the end of the period - 36,652 - -

NOTE 6 – CURRENCY TRANSLATION RESERVE

Opening balance 183 52 - -

Currency retranslation during the period (1,441) 131 - -

Closing balance - - 183(1,258)

NOTE 7 – CASH AND CASH EQUIVALENTS

Due from central and other banks

New Zealand - short term deposit 137,000 173,000 137,000 173,000

New Zealand - at call 48,830 61,290 48,830 61,290

Overseas - at call 16,053 - 16,053 -

Total due from central and other banks 201,883 234,290 201,883 234,290

Total cash and cash equivalents 201,883 234,290 201,883 234,290

7 (a) Reconciliation of Cash

Cash at the end of the reporting period as shown in the

Statement of Cash Flows is reconciled to items in the

Statement of Financial Position as follows:

Cash and cash equivalents 201,883 234,290 201,883 234,290

Overdrafts (19) (178) (19) (178)

201,864 234,112 201,864 234,112

_____________________________________________________________________________________________________________________






31/12/2012 31/12/2011 31/12/2012 31/12/2011


NOTE 8 – TRADING AND OTHER RECEIVABLES

Fee income receivable 1,487 1,829 1,487 1,828

Interest receivable 207 252 207 252

Amounts due from related parties 34,205 47,289 7,246 3,545

Client funds receivables 252,826 210,659 - -

Income tax receivable 434 - 420 -

Other receivable 17 - 17 -

289,176 260,029 9,377 5,625

NOTE 9 - FIXED ASSETS

Leasehold improvements

At cost 356 371 356 371

Less: Accumulated depreciation (135) (68) (135) (68)

Total leasehold improvements 221 303 221 303

Plant and equipment

At cost 107 114 107 114

Less: Accumulated depreciation (38) (17) (38) (17)

Total plant and equipment 69 97 69 97

Total property, plant and equipment 290 400 290 400

NOTE 10 - DEFERRED TAX ASSETS

Movements Depreciation

Employee

Entitlement Other Total

$'000 $'000 $'000 $'000

At 1 January 2011 - - - -

(Charged)/credited

- to profit or loss 24 48 - 72

At 31 December 2011 24 48 - 72

(Charged)/credited

- to profit or loss 43 (8) 24 59

At 31 December 2012 67 40 24 131

_____________________________________________________________________________________________________________________






31/12/2012 31/12/2011 31/12/2012 31/12/2011


NOTE 11 – PAYABLES

Interest payable 37 52 2 48

Client funds payables 241,083 204,520 - -

Accrued expenses 2,273 634 2,273 633

Amounts due to related parties 62,169 3,566 1,933 222

Deferred revenue 146 196 146 196

305,708 208,968 4,354 1,099

NOTE 12 – AUDITORS’ REMUNERATION

Fees for services rendered by the company’s auditors in relation to the statutory audit are borne by a related party, J.P. Morgan

Administrative Services Australia Limited.

NOTE 13 – KEY MANAGEMENT COMPENSATION

Key management personnel are defined as being Directors and Senior Management of the entities within the Banking Group. The

information relating the key management personnel disclosures includes transcations within those individuals, their close family

members or entities under their control.



31/12/2012 31/12/2011 31/12/2012 31/12/2011

Salaries and other short term benefits 1,065 1,301 257 216

Post-employement benefits 50 51 13 14

Other termination benefits - 20 - -

Share-based payments 160 202 - -

Long term benefits 43 19 - -

Total key management compensation 1,318 1,593 270 230


_____________________________________________________________________________________________________________________




NOTE 14 – RELATED PARTY TRANSACTIONS

The terms “JPMCB” or “Overseas Banking Group” mean the worldwide operations of JPMorgan Chase Bank, N.A., including

JPMCB NZ Group. “JPMCB NZ” means the NZ operations of JPMCB conducted through its NZ branch.

The terms “Banking Group” or “JPMCB NZ Group” mean the consolidated New Zealand operations of JPMCB, and include the

business conducted through JPMCB NZ and JPMCB’s subsidiaries and associated companies in New Zealand (being J.P. Morgan

Australia Limited, J.P. Morgan Securities Australia Limited and J.P. Morgan Markets Australia Pty Limited).

All of the Banking Group companies are ultimately owned by JPMCB.

The following branches are included in the Banking Group as they are registered in New Zealand and conduct investment

banking activities in New Zealand, although the companies are Australian incorporated:

· the New Zealand Operation of J.P. Morgan Australia Limited (incorporated in Australia);

· the New Zealand Operation of J.P. Morgan Markets Australia Pty Limited (incorporated in Australia); and

· the New Zealand Operation of J.P. Morgan Securities Australia Limited (incorporated in Australia).

During the period, there have been dealings between members of the Banking Group, and dealings with other subsidiaries of

JPMCB. Dealings include activities such as funding, accepting deposits, payment of fees on behalf of the Banking Group, income

attribution received from overseas desks for the sale of credits and rates products, and transactions between J.P. Morgan

Australia Group Pty Limited, the head entity in the Australian tax consolidated group, and the three Australian incorporated

companies within the Banking Group under various tax sharing agreements. These transactions are subject to normal commercial

terms and conditions. No related party debts have been written off, forgiven or provided for during the year.

_____________________________________________________________________________________________________________________




NOTE 14 – RELATED PARTY TRANSACTIONS (continued)



31/12/2012 31/12/2011 31/12/2012 31/12/2011


Due from Related Parties

Cash and cash equivalents 44 - 44 -

Amounts due from related parties 34,205 47,289 7,246 3,545

Income tax receivable 14 - - -

Cash collateral pledged on reverse repurchase agreements - 456,653 - -

Loans and receivables 18,811 - 18,811 -

Total due from related parties 53,074 503,942 26,101 3,545

Due to Related Parties

Overdrafts 19 178 19 178

Deposits – short term 138,616 136,798 138,616 136,798

Accrued expenses 29 2 29 2

Cash collateral received on repurchase agreements 1,164 - - -

Amounts due to related parties 62,169 3,566 1,933 222

Provision for taxation 842 12,376 - -

Total due to related parties 202,839 152,920 140,597 137,200

Received from Related Parties

Interest income 7,111 4,875 5 125

Fee and commissions income 3,173 1,866 486 1

Trading income/(loss) (6,960) 2,012 - -

Total received from related parties 3,324 8,753 491 126

Paid to Related Parties

Interest expense 2,468 130 2,323 130

Administration expenses 5,763 5,688 5,763 5,688

Income tax expense/(benefit) 836 12,307 - -

Total paid to related parties 9,067 18,125 8,086 5,818

_____________________________________________________________________________________________________________________




NOTE 15 – TOTAL LIABILITIES OF THE REGISTERED BANK, NET OF AMOUNTS DUE TO RELATED PARTIES



31/12/2012 31/12/2011 31/12/2012 31/12/2011

Total liabilities net of amounts due to related parties 72,849 150,431 135,091 150,431

Branch ($'000)Banking Group ($'000)

NOTE 16 – RECONCILIATION OF NET SURPLUS TO NET CASH INFLOW FROM OPERATING ACTIVITIES



31/12/2012 31/12/2011 31/12/2012 31/12/2011

Net profit/(loss) for the period 2,373 26,528 422 (2,188)

Movement in Head Office Repatriation included in net

surplus (36,356) 4,128 806 4,128

Depreciation and amortisation 228 199 228 199

Changes in operating assets and liabilities:

Movement in financial instruments (19,903) 173,663 - -

Movement in fee income receivable 342 (363) 341 (362)

Movement in accrued interest receivable 45 (139) 45 (139)

Movement in amounts due from related parties 13,084 (46,370) (3,701) (2,630)

Movement in client funds receivables (42,167) (70,223) - -

Movement in other receivable (451) 902 (437) 902

Movement in deferred tax assets (59) (72) (59) (72)

Movement in loans (16,898) (45,388) (16,898) (45,388)

Movement in deposits (13,807) 158,961 (13,807) 158,961

Movement in tax payable (12,765) 10,325 (1,231) 1,231

Movement in accrued interest payable (15) (182) (46) (186)

Movement in client funds payable 36,563 65,349 - -

Movement in accrued expenses 1,639 201 1,640 200

Movement in amounts due to related parties 58,603 (163,485) 1,711 (491)

Movement in deferred revenue (50) 196 (50) 196

Movement in foreign exchange translation balances

attributable to cash balances (575) 1,300 867 1,169

Net cash inflow/(outflow) from operating activities (30,169) 115,530 (30,169) 115,530


NOTE 17 – COMMITMENTS AND CONTINGENT LIABILITIES

As at 31 December 2012, the Group had an undrawn committed facility of $158.7mm (31 December 2011: $157.2mm) and a

stand-by letter of credit of $2.0mm (31 December 2011: $0.4mm). In addition, the Group had lease commitments of $0.7mm as

at the reporting date (31 December 2011: $0.9mm).

_____________________________________________________________________________________________________________________




NOTE 18 – LEASE COMMITMENTS

Lease payment and lease commitments for the rental and make good of premises are payable as follows:



31/12/2012 31/12/2011 31/12/2012 31/12/2011

Lease payment included in the Statement of Comprehensive

Income 217 217 217 217

Lease commitment

0-1 year 210 217 210 217

1-5 year 489 723 489 723

> 5 year - - - -


NOTE 19 – INTANGIBLE ASSETS

Goodwill and intangible assets were acquired as part of the purchase of ANZ New Zealand custody business on 18 December

2009.



31/12/2012 31/12/2011 31/12/2012 31/12/2011

Goodwill 642 642 642 642

Intangible assets – Custody clearing services software 289 289 289 289

Intangible assets – Customer contracts/relationships 377 377 377 377

Amortisation of intangible assets (407) (273) (407) (273)

Net Intangibles 901 1,035 901 1,035


NOTE 20 – EVENTS AFTER THE REPORTING PERIOD

No matter or circumstances have arisen since the end of the reporting period which significantly affected, or may significantly

affect, the operations, the results of those operations, or the state of affairs of the JPMCB NZ branch or the JPMCB NZ Group in

future financial years.

_____________________________________________________________________________________________________________________




SUPPLEMENTAL INFORMATION

NOTE 21 – FINANCIAL STATEMENTS OF JPMORGAN CHASE BANK, N.A.

Attached to, and forming part of, this General Disclosure Statement are the most recent publicly available (un-audited)

financial statements of JPMCB for the twelve months ended 31 December 2012 prepared in accordance with US GAAP, and the

most recently audited financial statements of JPMCB, being for the twelve months ended 31 December 2011. The most recent

publicly available General Disclosure Statement of JPMorgan Chase Bank New Zealand Group and JPMorgan Chase Bank, NA can

be accessed online at http://www.jpmorgan.com/pages/international/newzealand.

NOTE 22 – INTEREST EARNING AND DISCOUNT BEARING ASSETS AND LIABILITIES



31/12/2012 31/12/2011 31/12/2012 31/12/2011

Interest earning and discount bearing assets 335,290 745,566 264,989 280,498

Interest earning and discount bearing liabilities 322,880 747,697 271,315 285,122


NOTE 23 – CAPITAL ADEQUACY

The Federal Reserve Board establishes capital requirements, including well-capitalised standards, for the consolidated financial

holding company, JPMorgan Chase & Co. The Office of the Comptroller of the Currency establishes similar requirements for

JPMCB. These requirements are equal to those specified under the Basel Framework, that is, 4% of Tier 1 Capital and 8% of Total

Capital as a percentage of risk weighted assets. Both JPMorgan Chase & Co. and JPMCB exceeded these requirements as at 31

December 2012.

Capital Adequacy Ratios

JPMCB (consolidated)

31/12/2012

Unaudited


31/12/2011

Audited

Tier 1 Capital

10.22% 9.44%

Total Capital

13.42% 13.04%

The ratios given for JPMCB are for the consolidated JPMCB group, including JPMCB and its subsidiary and associated companies.

The capital ratios for unconsolidated JPMCB are not publicly available. JPMCB is subject to the capital requirements of the

Office of the Comptroller of the Currency, the capital requirements of which are at least equal to those specified under the

Basel framework and are not publicly available.

NOTE 24 – CONCENTRATION OF CREDIT EXPOSURE TO INDIVIDUAL COUNTERPARTIES

JPMCB NZ Group has no aggregate credit exposure to an individual counterparty or group of closely related counterparties

(whether bank or non-bank exposures) which equals or exceeds 10% of JPMCB’s equity as at 31 December 2012 or 31 December

2011, or in respect of peak end-of-day aggregate credit exposures for the most recent quarter of the financial year.

_____________________________________________________________________________________________________________________





NOTE 25 – ACTIVITIES OF THE BANKING GROUP IN NEW ZEALAND

As at 31 December 2012 no members of the Banking Group have been involved in:

(a) the origination of securitised assets or the marketing or servicing of securitisation schemes;

(b) the marketing and distribution of insurance products.

Custodial Services

The financial statements of the Branch include income in respect of custodial services provided to customers by the Branch. As

at 31 December 2012, securities held on behalf of the Branch’s customers were excluded from the Branch’s Statement of

Financial Position. The value of securities held on behalf of the Branch’s customers was NZD 21,761 million (December 2011:

NZD 21,113 million).

The Branch is subject to the typical risks incurred by custodial operations. JPMorgan Chase & Co maintains a range of insurance

policies (for its own benefit and that of subsidiaries including the Branch), including Banker’s Blanket Bond Insurance that

provides cover for it in respect of loss of money/securities (through fraud, theft or disappearance). Such Banker’s Blanket Bond

cover is maintained with limits of cover which vary from time to time but which are considered prudent and in accordance with

international levels and insurance market capacity.

NOTE 26 – RISK MANAGEMENT

The activities of the JPMCBNA NZ Branch and Associated Banking Group expose it to a variety of financial risks: market risk

(including currency risk, fair value interest rate risk and price risk), credit risk and liquidity risk. The JPMorgan Group in

Australia and New Zealand undertakes financial risk management functions on a group basis, in line with the global policy and

procedure framework of the global JPMorgan Chase & Co. group (“The Firm”).

The Firm’s risk management model is based around global risk management policies, procedures and systems. These are

assessed at a regional and location level to ensure that the risks faced by each location are adequately and appropriately

identified, quantified, monitored and reported while permitting each location to utilise global systems and expertise to

effectively manage these risks.

The Firm’s risk management framework and governance structure is intended to provide comprehensive controls and ongoing

management of the major risks inherent in its business activities. Global risk management policies are included in JPMorgan

Chase & Co.’s financial statements.

Copies are available from our web-page: http://www.jpmorgan.com/pages/jpmorgan/au/home.

Liquidity Risk

Liquidity risk management begins at the Branch level, where reporting and analytics provide management an extensive

evaluation of the liquidity posture of the branch. It extends globally as JPMorgan Chase & Co. employs a centralized funding

model, and as well, measures liquidity risk at the consolidated firm level. This allows the firm to optimize cash globally,

maintain a consistent view of liquidity risk and to minimize the economic cost of managing the global liquidity position. The

Branch is a beneficiary of the firm’s global funding resources and capital strength, and will borrow from/lend to intra-group

entities consistent with the centralized funding model in place across the firm.

The Australia and New Zealand Asset and Liability Committee is the Branch’s primary liquidity risk governance committee, the

Committee convenes on a monthly basis and its agenda includes review of reports summarizing the liquidity profile of the

Branch. It reviews and approves the Liquidity Risk Management Statement which outlines local governance , measurement and

monitoring of liquidity risk and contingency funding. The Committee is chaired by the Senior Country Officer with

representatives from the Chief Administrative Office, Treasury, Finance, CIO, Market Risk as well as from all major lines of

business.

The day-to-day responsibility for management of liquidity risk of the Branch is delegated to the Australia/New Zealand

Treasurer who, operating under the functional oversight of Asia-Pacific Regional Treasurer, ensures compliance with RBNZ

regulations and the branch’s liquidity risk management statement. It formulates the location’s liquidity strategies including

contingency planning; monitors the cash flow requirements of the Branch to manage funding gaps; maintains ongoing interaction

with lines of business to track business trends and associated funding needs and monitors and maintains access to cost effective

funding. This comprehensive liquidity risk management framework ensures the Branch maintains adequate liquidity to meet its

cash obligations even during periods of funding stress.

_____________________________________________________________________________________________________________________





NOTE 26 – RISK MANAGEMENT (continued)

Market Risk

The JPMCBNA NZ Branch and Associated Banking Group are subject to limited market risk through their treasury operations and

fixed income market making over NZ Government and NZ Bank Bills (including making a market in repurchase and reverse

repurchase transactions).

The Head of Australia and New Zealand Market Risk Management is located in Sydney, and covers all businesses and legal

entities within the JPMCBNA NZ Branch and Associated Banking Group NZ Banking Group. It does not operate any unique market

risk requirements locally and the identification, monitoring and control functions are conducted in line with the global policy

requirements, leveraging the global systems and infrastructure.

Local management oversight of all structural risk exposures managed across Treasury and Fixed Income is conducted through the

location ALCO. This committee reviews all structural interest rate risk booked or risk managed locally. Stress testing of the

Fixed Income structural interest rate positions are also reported to ALCO monthly.

The Fixed Income Australia & New Zealand Business Control Committee (“BCC”) meets every quarter and includes risk groups

such as legal, compliance, tax, market risk and finance valuation and policy. The BCC provides an opportunity for these risk

groups to monitor, escalate and highlight key risks and potential control gaps.

Credit Risk

The JPMCBNA NZ Branch and Associated Banking Group are subject to limited credit risk from the Banking Groups loans to

customers and investment securities. It does not operate any unique credit risk requirements locally and the identification,

monitoring and control functions are conducted in line with the global policy requirements, leveraging the global systems and

infrastructure.

Monitoring the credit risk profile of the location is conducted by the Credit Portfolio Group in Sydney. In addition, it is

responsible for approving new facilities, and has oversight with respect to the performance of existing exposures. Final authority

for credit risk assessments is formalised based on a credit authority grid. Where necessary, approval may be sought from

offshore credit executives with higher lending authority. The firm has centralised credit risk management responsibility with

respect to managed funds and hedge fund activity for the Asia Pacific region based in Singapore.

Credit Portfolio Management as part of the Credit Portfolio Group is responsible for (i) developing and implementing forward-

looking strategies for actively managing the Firm’s retained credit portfolio and (ii) focusing on concentrations (thresholds),

correlation (industry limits) and credit migration with the objective of maximizing economic performance through the credit

cycle.

Operational Risk

Within the JPMCBNA NZ Branch and Associated Banking Group, there are a number of Governance Committees which help to

oversee and drive the operational risk framework:

The Branch Governance Committee (“BGC”) has responsibility for ensuring:

· compliance with the requirements of JPMorgan Chase Bank, N.A’s corporate policies and other relevant laws and

regulations (such as Anti-Money Laundering and the Banking Act);

· adherence to RBNZ’s Prudential Standards; and

· maintenance of the Risk Management policy framework.

The BGC provides oversight of significant operating risk issues, and monitors the development and implementation of effective

strategies to mitigate these risks, as well as monitoring internal controls (i.e. ensuring compliance with policies, procedures,

laws and regulations) and local infrastructure (including operations, technology, people and premises) to ensure its adequacy

and efficiency in supporting the LOBs conducted in the entity. This committee is chaired by the Senior Country Officer, and is

composed of the Chief Administrative Officer (“CAO”), Head of Compliance, Chief Financial Officer (“CFO”), Head of Legal and

Compliance, Head of Tax, Head of Credit, the New Zealand Chief Executive Officer, Head of IS and the Head of TS.

_____________________________________________________________________________________________________________________






Operational Risk (continued)

Additionally, the Australia & New Zealand Operating Committee (“ANZOC”), which is chaired by the CAO and includes

participation by all risk management functions, LOBs and support functions, is responsible for providing an effective and

integrated governance structure across all LOBs, legal entities and support functions operating in Australia and New Zealand,

escalating significant control and infrastructure matters to the attention of the Australia & New Zealand Executive Committee

(“ANZEC”).

The ANZOC feeds into The Asia Pacific Operating Committee (“APOC”) and the Asia Pacific Risk and Control Committee (“RCC”),

with the APOC’s primary focus being strategy execution and the RCC overseeing the risk and control agenda. The RCC meets on

a monthly basis and reviews the consolidated high risk issues across all locations in the region. This committee, chaired by the

Asia Pacific CFO, presents to the Chairman and CEO of Asia Pacific on a regular basis to keep the Chairman and CEO apprised of

the control environment in the region. The Australian CAO is a member of both the APOC and the RCC .

Business Control Committees oversee the operational risk management practices in line with their respective LOB operational

risk management policies and the local regulatory framework.

Finally, all J.P. Morgan Australian incorporated legal entities within the NZ Banking Group have Boards who are ultimately

responsible for the oversight of the licensing and regulatory obligations, risk management systems and processes supporting

their business activities.

The Controlled Self Assessment Process is a formal process for identifying, prioritising and monitoring operational risk across all

LOBs. Each NZ LOB assesses the effectiveness of the individual controls put in place to mitigate key risks, and identifies any gaps

in its control environment that could lead to losses. A corrective action plan is then created to address identified weaknesses,

with specific accountability assigned which facilitates appropriate reporting and timely follow-up.

In respect of any new products and/or activities, a LOB must seek approval via the New Business Initiative Assessment (“NBIA”)

process. In addition to LOB specific requirements as articulated in respective LOB NBIA policies and procedures, this involves

presenting all NBIAs to the Australia & NZ NBIA Committee, which is chaired by the CAO with representation and signoff required

by all key risk and corporate functions. The process assesses all risks which the proposal generates and obtains the approval of

those responsible for managing those risks prior to implementation.

Location management evaluates the key financial controls for processes and applications that JPMCBNA NZ Branch and

Associated Banking Group operates as well as the processes and applications that the location outsources to external and

offshore providers. On a quarterly basis, an attestation is provided by senior location management for each entity, confirming

that the system of internal controls and program for compliance with applicable laws and regulations, are operating in an

adequate and effective manner. These attestations, as well as significant or material changes and issues in the financial

reporting process, are reviewed and evaluated centrally by the senior location management team, who in turn provide a

location attestation to regional management.

Each LOB has escalation and incident reporting procedures which ensure that incidents are identified and escalated to

appropriate personnel including direct supervisors, Legal and Compliance, Audit, Operational Risk Management and Global

Security and Investigations. It also ensures incidents are appropriately documented and assessed for potential breaches of

regulations and laws relevant to our banking authorisation, and reported as appropriate, and that preventative measures are

implemented to prevent the incident occurring again.

On a monthly basis each of the LOBs complete a “Location Operational Risk Scorecard”, which ranks key risk indicators (“KRIs”)

across the broad risk categories of Client, Reputational Risk, Regulatory & Governance, Operational Control, Technology

Control, Product Complexity & Capture, Human Resources / People and Planning & Control. The LOB results are then

consolidated to form the Location Operational Risk Scorecard (“LORS”) which is reviewed by the CAO, ANZOC and the ANZEC.

The LORS is consolidated into a regional operational risk scorecard, which is tabled at the RCC.

_____________________________________________________________________________________________________________________






Quantitative disclosures outlining the Banking Group’s exposure to the risks discussed above are covered below:

Exposure to Liquidity Risk

The following is an analysis of cash flows receivable and payable under financial assets and liabilities by remaining contractual

maturities at the end of the reporting period for JPMCB NZ Group:

Total

On

Demand

Up to 3

months

Over 3

months

and up to

6 months

Over 6

months

and up to

1 year

Over 1

year and

up to 2

years

Over 2

years

Non

specified

ASSETS

Cash and cash equivalents 201,883 201,883 - - - - - -

Client funds receivables 252,826 252,826 - - - - - -

Receivables 36,350 - 36,350 - - - - -

Goverment bonds 58,395 - 58,395 - - - - -

Non-goverment bonds 134 - 134 - - - - -

Equity securities 119,966 - 119,966 - - - - -

Cash collateral pledged on

reverse repurchase

agreements 11,772 - 11,772 - - - - -

Loans 63,106 24,032 39,074 - - - - -

Fixed assets 290 - - - - - - 290

Intangible assets 901 - - - - - - 901

Deferred tax assets 131 - - - - - - 131

Total Assets 745,754 478,741 265,691 - - - - 1,322

LIABILITIES

Overdrafts 19 19 - - - - - -

Deposits – short term 271,315 271,315 - - - - - -

Goverment bonds 5,401 - 5,401 - - - - -

Equity securities 116,305 - 116,305 - - - - -

Cash collateral received on

repurchase agreements 46,164 - 46,164 - - - - -

Client funds payables 241,083 241,083 - - - - - -

Payables 64,625 - 64,479 - - - 146 -

Provision for taxation 842 - - - 842 - - -

Total Liabilities 745,754 512,417 232,349 - 842 - 146 -

Banking Group ($'000)

Audited

31/12/2012

_____________________________________________________________________________________________________________________






Total

On

Demand

Up to 3

months

Over 3

months

and up to

6 months

Over 6

months

and up to

1 year

Over 1

year and

up to 2

years

Over 2

years

Non

specified

ASSETS


Client funds receivables 210,659 210,659 - - - - - -

Receivables 49,370 - 49,370 - - - - -

Goverment bonds 5,940 - 5,940 - - - - -

Non-goverment bonds 801 - 801 - - - - -

Cash collateral pledged on

reverse repurchase

agreements 458,327 - 458,327 - - - - -

Loans 46,208 3,430 42,778 - - - - -

Fixed assets 400 - - - - - - 400

Intangible assets 1,035 - - - - - - 1,035


Total Assets 1,007,102 448,379 557,216 - - - - 1,507

LIABILITIES

Overdrafts 178 178 - - - - - -


Goverment bonds 5,316 - 5,316 - - - - -


repurchase agreements 457,259 - 457,259 - - - - -

Client funds payables 204,520 204,520 - - - - - -

Payables 4,448 - 4,252 - - - 196 -

Provision for taxation 13,607 - - - 13,607 - - -

Total Liabilities 970,450 489,820 466,827 - 13,607 - 196 -


Audited

31/12/2011

_____________________________________________________________________________________________________________________






JPMCB NZ’s Branch analysis of cash flows receivable and payable under financial assets and liabilities by remaining contractual

maturities are as follows:

Total

On

Demand

Up to 3

months

Over 3

months

and up to

6 months

Over 6

months

and up to

1 year

Over 1

year and

up to 2

years

Over 2

years

Non

specified

ASSETS


Receivables 9,377 - 9,377 - - - - -

Loans 63,106 24,032 39,074 - - - - -

Fixed assets 290 - - - - - - 290

Intangible assets 901 - - - - - - 901


Total Assets 275,688 225,915 48,451 - - - - 1,322

LIABILITIES

Overdrafts 19 19 - - - - - -


Payables 4,354 - 4,208 - - - 146 -

Total Liabilities 275,688 271,334 4,208 - - - 146 -

Branch ($'000)

Audited

31/12/2012

_____________________________________________________________________________________________________________________






Total

On

Demand

Up to 3

months

Over 3

months

and up to

6 months

Over 6

months

and up to

1 year

Over 1

year and

up to 2

years

Over 2

years

Non

specified

ASSETS


Receivables 5,625 - 5,625 - - - - -

Loans 46,208 3,430 42,778 - - - - -

Fixed assets 400 - - - - - - 400

Intangible assets 1,035 - - - - - - 1,035


Total Assets 287,630 237,720 48,403 - - - - 1,507

LIABILITIES

Overdrafts 178 178 - - - - - -


Payables 1,099 - 903 - - - 196 -

Provision for taxation 1,231 - - - 1,231 - - -

Total Liabilities 287,630 285,300 903 - 1,231 - 196 -

Audited

31/12/2011

Branch ($'000)

_____________________________________________________________________________________________________________________






Concentration of Credit Risk

The carrying amount of JPMCB NZ Group’s financial assets represents the maximum credit exposure. The maximum exposure to

credit risk at reporting date was:


31/12/2012 31/12/2011 31/12/2012 31/12/2011

Credit Risk by industry

Finance 276,718 672,607 18,811 443

Local Authorities 58,188 624 - -

Communication 41,296 42,778 41,296 42,778

Manufacturing 2,999 2,987 2,999 2,987

Other 7,031 2,939 - -

386,232 721,935 63,106 46,208

Credit Risk by geographical area

Within New Zealand 293,987 217,963 44,293 45,765

Overseas 92,245 503,972 18,813 443

386,232 721,935 63,106 46,208


Cash balances are held with registered banks in New Zealand rated AA- by S&P. There is no provision for doubtful debts in

relation to the receivables, and there are no significant concentrations of credit risk at the end of the reporting period.

_____________________________________________________________________________________________________________________






Concentration of Funding Risk

The carrying amount of JPMCB NZ Group’s financial liabilities represents the maximum funding exposure. The maximum

exposure to funding risk at reporting date was:


31/12/2012 31/12/2011 31/12/2012 31/12/2011

Funding Risk by industry

Finance 462,877 826,189 192,023 171,547

Electricity 61,395 86,333 45,002 79,196

Local Authorities 5,401 - - -

Manufacturing 15,865 14,040 15,865 14,040

Business Services 9,276 3,343 9,276 3,343

Retail Trade 1,930 - 1,930 -

Other 7,238 22,489 7,238 17,174

563,982 952,395 271,334 285,300

Funding Risk by geographical area

Within New Zealand 362,361 316,798 70,878 112,278

Overseas 201,621 635,596 200,456 173,022

563,982 952,395 271,334 285,300


_____________________________________________________________________________________________________________________






Interest Rate Sensitivity

JPMCB NZ Group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of

changes in market interest rates and the period-end interest rates on classes of financial assets and financial liabilities, is as

follows:

Total

Up to 3

months

Over 3

months and

up to 6

months

Over 6

months

and up to

1 year

Over 1

year and

up to 2

years

Over 2

years

Not

interest-

bearing

ASSETS

Cash - at call 64,883 64,883 - - - - -

Cash - short-term deposits 137,000 137,000 - - - - -

Client funds receivables 252,826 - - - - - 252,826

Receivables 2,145 - - - - - 2,145

Receivables from related parties 34,205 - - - - - 34,205

Financial assets at fair value

through profit or loss 178,495 58,529 - - - - 119,966

Cash collateral pledged on reverse

repurchase agreements 11,772 11,772 - - - - -

Loans 63,106 63,106 - - - - -

Fixed assets 290 - - - - - 290

Intangible assets 901 - - - - - 901

Deferred tax assets 131 - - - - - 131

Total Assets 745,754 335,290 - - - - 410,464

LIABILITIES

Overdrafts 19 - - - - - 19

Deposits – short term 271,315 271,315 - - - - -

Financial liabilities at fair value

through profit or loss 121,706 5,401 - - - - 116,305



Client funds payables 241,083 - - - - - 241,083

Payables 2,456 - - - - - 2,456

Payables to related parties 62,169 - - - - - 62,169

Provision for taxation 842 - - - - - 842

Total Liabilities 745,754 322,880 - - - - 422,874

Audited


31/12/2012

_____________________________________________________________________________________________________________________






Total

Up to 3

months

Over 3

months and

up to 6

months

Over 6

months

and up to

1 year

Over 1

year and

up to 2

years

Over 2

years

Not

interest-

bearing

ASSETS

Cash - at call 61,290 61,290 - - - - -


Client funds receivables 210,659 - - - - - 210,659

Receivables 2,081 - - - - - 2,081



through profit or loss 6,741 6,741 - - - - -



Loans 46,208 46,208 - - - - -

Fixed assets 400 - - - - - 400

Intangible assets 1,035 - - - - - 1,035


Total Assets 1,007,102 745,566 - - - - 261,536

LIABILITIES

Overdrafts 178 - - - - - 178



through profit or loss 5,316 5,316 - - - - -



Client funds payables 204,520 - - - - - 204,520

Payables 882 - - - - - 882


Provision for taxation 13,607 - - - - - 13,607



Audited

31/12/2011

_____________________________________________________________________________________________________________________






JPMCB NZ’s Branch exposure to interest rate risk is as follows:

Total

Up to 3

months

Over 3

months and

up to 6

months

Over 6

months

and up to

1 year

Over 1

year and

up to 2

years

Over 2

years

Not

interest-

bearing

ASSETS

Cash - at call 64,883 64,883 - - - - -


Receivables 2,131 - - - - - 2,131


Loans 63,106 63,106 - - - - -

Fixed assets 290 - - - - - 290

Intangible assets 901 - - - - - 901


Total Assets 275,688 264,989 - - - - 10,699

LIABILITIES

Overdrafts 19 - - - - - 19


Payables 2,421 - - - - - 2,421



Branch ($'000)

Audited

31/12/2012

_____________________________________________________________________________________________________________________






Total

Up to 3

months

Over 3

months and

up to 6

months

Over 6

months

and up to

1 year

Over 1

year and

up to 2

years

Over 2

years

Not

interest-

bearing

ASSETS

Cash - at call 61,290 61,290 - - - - -


Receivables 2,080 - - - - - 2,080


Loans 46,208 46,208 - - - - -

Fixed assets 400 - - - - - 400

Intangible assets 1,035 - - - - - 1,035


Total Assets 287,630 280,498 - - - - 7,132

LIABILITIES

Overdrafts 178 - - - - - 178


Payables 877 - - - - - 877

Payables to related parties 222 - - - - - 222

Provision for taxation 1,231 - - - - - 1,231


Audited

31/12/2011

Branch ($'000)

_____________________________________________________________________________________________________________________





NOTE 27 – FAIR VALUE MEASUREMENT

Financial instruments held at fair value are categorised under a three-level valuation hierarchy, reflecting the availability of

observable market inputs for the valuation of each particular class of financial instrument held as of the balance sheet date.

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety shall be determined

on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

The three levels are defined as follows:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly

(i.e as prices) or indirectly (i.e derived from prices), including quoted prices for similar assets and liabilities in active

markets.

Level 3 - inputs for the asset or liability that are not based on observable market data.

The table below presents the financial instruments held at fair value at balance date, classified by level, according to the fair

value hierarchy:

The carrying amounts for the financial assets and liabilities are assumed to be approximate to their fair value due to their short-

term nature.

Banking Group Branch

Audited $'000 Audited $'000

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

31 December 2012


through profit or loss

119,966 58,529 - 178,495 - - - -


through profit or loss

116,305 5,401 - 121,706 - - - -

31 December 2011


through profit or loss - 6,741 - 6,741 - - - -


through profit or loss - 5,316 - 5,316 - - - -

_____________________________________________________________________________________________________________________





NOTE 28 – FINANCIAL INSTRUMENTS BY CATEGORY

The following is an analysis of financial instruments held at the end of the reporting period for the JPMCB NZ Branch and JPMCB

NZ Group:



Loan and

receivables

Fair value

through

profit or loss

Total Loan and

receivables

Fair value

through

profit or loss

Total

31 December 2012

Assets

Current Assets

Trading and other receivables 289,176 - 289,176 9,377 - 9,377

Financial assets at fair value through

profit or loss - 178,495 178,495 - - -


repurchase agreements 11,772 - 11,772 - - -

Loans 63,106 - 63,106 63,106 - 63,106

364,054 178,495 542,549 72,483 - 72,483

Liabilities

Current Liabilities


through profit or loss - 121,706 121,706 - - -



46,164 121,706 167,870 - - -

_____________________________________________________________________________________________________________________





NOTE 28 – FINANCIAL INSTRUMENTS BY CATEGORY (continued)

The following is an analysis of financial instruments held at the end of the reporting period for the JPMCB NZ Branch and JPMCB

NZ Group:



Loan and

receivables

Fair value

through

profit or loss

Total Loan and

receivables

Fair value

through

profit or loss

Total

31 December 2011

Assets

Current Assets

Trading and other receivables 260,029 - 260,029 5,625 - 5,625

Financial assets at fair value through

profit or loss - 6,741 6,741 - - -



Loans 46,208 - 46,208 46,208 46,208

764,564 6,741 771,305 51,833 - 51,833

Liabilities

Current Liabilities


through profit or loss - 5,316 5,316 - - -



457,259 5,316 462,575 - - -

_____________________________________________________________________________________________________________________





NOTE 29 – EXPOSURES TO MARKET RISK

Set out below are details of market risk end-period notional capital charges and market risk peak end-of-day notional capital

charges. These have been derived using the Capital Adequacy Framework (Standardised Approach) (BS2A) methodology, which is

in accordance with Schedule 9 of the Registered Bank Disclosure Statements (Overseas Incorporated Registered Banks) Order

(No. 2) 2012. Market risk exposures have been derived using the Capital Adequacy Framework (Standardised Approach) (BS2A)

methodology.


Implied risk weighted exposure Notional capital charge

31 December 2012

Market Risk End-period

Interest rate risk 1,513 121

Foreign currency risk - -

Equity risk 3,661 293

1 July 2012 - 31 December 2012

Market Risk Peak End-of-day

Interest rate risk 1,513 121

Foreign currency risk 43,384 3,471

Equity risk 3,661 293

Audited

NOTE 30 – REGISTERED BANK ASSET QUALITY

There are no expected material losses or diminution in asset value for JPMCB NZ or JPMCB NZ Group. The provision of

information in relation to the following classes of assets is therefore not necessary:

· other individually impaired assets;

· restructured assets;

· financial assets acquired through the enforcement of security;

· real estate assets acquired through the enforcement of security;

· other assets acquired through the enforcement of security;

· other assets under administration.

The table below presents assets past due at balance date:


Audited

31/12/2012

Up to 30 days

Over 30 days

and up to 60

days

Over 60 days

and up to 90

days Over 90 days Total

Past due and not impaired 98 92 - 92 282

_____________________________________________________________________________________________________________________





NOTE 30 – REGISTERED BANK ASSET QUALITY (continued)

JPMCB NZ Branch JPMCB NZ Group JPMCB (consolidated)

Audited Audited Audited Audited Unaudited Audited

12 months 12 months 12 months 12 months 12 months 12 months

31/12/2012 31/12/2011 31/12/2012 31/12/2011 31/12/2012 31/12/2011

NZ$'000 NZ$'000 NZ$'000 NZ$'000 US$'000 US$'000

Total individually impaired assets

(before allowances for credit

impairment loss and net of interest

held in suspense) - - - - 32,938,000 35,430,000

Total individually impaired assets

expressed as a percentage of total

assets - - - - 1.7% 2.0%

Total individual credit impairment

allowance - - - - 17,191,000 21,507,000

Total individual credit impairment

allowance expressed as a

percentage of total impaired assets - - - - 52.2% 60.7%

Total collective credit impairment

allowance - - - - - -

Non-financial assets acquired

through the enforcement of security - - - - - -

NOTE 31 – REGISTERED BANK PROFITABILITY AND SIZE


Unaudited Audited

12 months 12 months

31/12/2012 31/12/2011

US$'000 US$'000

Net profit/(loss) after taxation 13,955,000 12,456,000

Net profit/(loss) after taxation, over

the previous 12 month period, as a

percentage of average total assets 0.8% 0.7%

Total assets 1,896,773,000 1,811,678,000

Percentage increase/(decrease) in

total assets from previous period 4.7% 11.0%

Documents

JPMorgan Chase Bank, National Association, New Zealand Branch General Disclosure Statement · JPMorgan Chase Bank, National Association (generally abbreviated to JPMorgan Chase Bank,